💰Sinking Fund Design

The Sinking Fund is money set aside to offset the costs of maintaining VBUSD's collateral structure!

In accordance with the NakaDollar proposal by Arthur Hayes, the VBUSD protocol has a Sinking Fund purposed to offset any collateral shortfall. The Sinking Fund, held as VBUSD, is deployed by the contracts themselves to maintain 100% backing and is not dependent on manual distribution.

Use of the Sinking Fund

The Sinking Fund serves as the first line of defense against any destabilizing factors. The protocol's other recollateralization mechanisms are only used after the Sinking Fund is depleted, as those other methods penalize users, whereas the Sinking Fund is intended solely for this purpose. The Sinking Fund also incentivizes the keepers that handle reinitialization.

Sources of Funds for the Sinking Fund

• The purpose of the Initial Raise is to seed the Sinking Fund

• The Sinking Fund receives a portion of the protocol's Embedded Yield

Sinking Fund Policy

• The Sinking Fund is used to maintain full collateralization of >1 USD worth of assets per VBUSD

• Admin can add or remove funds from the Sinking Fund manually

• Admin can reset the percentage of Embedded Yield received by wVBUSD holders, the team/infrastructure, and the Sinking Fund